457 Reform Discussion Paper Released

By Mark Webster
Monday, 06 May 2013

The Department of Immigration has released a discussion paper entitled "Strengthening the Integrity of the Subclass 457 Program". This discussion paper was produced by the Department of Immigration for the Ministerial Advisory Council on Skilled Migration (MACSM) in December 2012.

Changes to the 457 program were announced by Minister Brendan O'Connor in March 2013, and are likely to come into effect on 1 July 2013. These changes are understood to be based on the MACSM recommendations and the discussion paper gives us the clearest picture yet of what the likely changes will be.

Commitment to Employing Local Labour

Currently, employers need to attest that they have a strong record of or demonstrated commitment to employing Australian workers.

However, this attestation is currently difficult to enforce. There is some concern that employers are relying largely on 457 workers and not seeking to source workers from the Australian labour market first.

The Discussion Paper recommends that the attestation be made enforceable. Employers who discriminate against local workers in their hiring practices may be sanctioned or find it difficult to renew their sponsorship.

Training Benchmarks

Employers seeking to use the 457 program must meet one of two training benchmarks to be approved as a sponsor. Employers must either spend 1% of payroll on training Australians, or make a contribution of 2% of payroll to an industry training fund. Newly established businesses (ie operating for less than 12 months) can provide evidence of an auditable training plan which will meet either of the above benchmarks.

The Discussion Paper identifies a number of issues with the current training requirements:

The Migration Regulations do not specify that training records must be kept by employers - this makes monitoring and sanctioning difficult

Newly Established businesses currently have no ongoing obligation to meet training requirements after providing the training plan

For renewal of a sponsorship, businesses need to show just that they currently meet the training requirement. They do not need to show that they have met the training requirement for each year of the sponsorship

The Discussion Paper suggests that the training benchmark provisions be strengthened so that they are a binding requirement rather than a commitment.

Genuineness of Nomination

Current Migration Regulations require that the employer certify that the position offered is in a specific occupation on the approved Consolidated Sponsored Occupation List. The Department of Immigration has only limited capacity to question whether the position nominated falls within an approved occupation, and is concerned that some positions are "dressed up" to fall within the CSOL.

This is of particular concern as if the position is not scrutinised for the 457 application, the employee can look at applying for permanent residence through the Temporary Residence Transition stream of the ENS visa after 2 years.

The Discussion Paper suggests that a genuineness criterion be added to the nomination requirements for 457 visas, and also allow for refusal if the tasks and duties of the position do not fall within an approved occupation.

Limitations on Number of 457 Applicants which can be Sponsored

Once a business is approved as a business sponsor, there is currently no limit to the number of 457 visa applicants which can be sponsored. As a result, there is a concern that some businesses are relying heavily on 457 holders and not first looking at the local labour market.

The Discussion Paper suggests that employers should specify and justify the number of people that they wish to sponsor for 457 visas - a "nomination ceiling". Once the initial allocation is used up, sponsors would need to apply to vary the terms of their sponsorship and add more places.

Generalist Occupations

Concern was expressed in the Discussion Paper about the over-use by some employers of generalist occupations, such as Program or Project Administrators (ANZSCO 511112) and Specialist Managers Not Elsewhere Classified (139999).

The changes proposed by the Discussion Paper are:

To limit the circumstances in which these generalist occupations can be used (eg in certain industries only)

To require applicants in these occupations to have their skills assessed by the relevant skills assessing authority (eg VETASSESS)

Market Rate Salary

The current 457 regulations require that 457 employees receive the same remuneration, or higher, than an Australian citizen or permanent resident would receive in an equivalent position. For positions where the earnings are $180,000 or more per annum, there is an exemption from the market rate requirement.

Under the current regulations, if a single permanent resident or citizen working for the business is on a similar or lower salary than the 457 applicant, the market rate requirement will be taken as met.

There are also concerns that if the market rate for the position is over $180,000, there are incentives to source labour from overseas rather than locally due to the market rate exemption for such positions.

The Discussion Paper recommends that:

Instead of just looking at the 457 sponsor's business, that the market rate be determined by looking at all businesses in the region the employer operates; and

The earnings threshold for the market rate exemption be raised from $180,000 to $250,000

Commentary

The major thrust of the changes is to ensure that employers first seek to employ Australian workers before using the 457 program. Suggested changes which support this are as follows:

Making the Attestation about employing local labour enforceable

Imposing a ceiling on the number of employees which can be sponsored for 457 visas under a sponsorship

I would expect that the above changes will make it difficult for employers to rely entirely on 457 holders and will need to employ a reasonable number of Australians as well. We may well return to the "rule of thumb" which applied prior to September 2009 which allowed only up to 25% of workers to hold 457 visas.

Changes are also being made to ensure that only genuine positions are approved - these include:

Allowing for refusal of nominations if they are not "genuine" or are not sufficiently close to an approved CSOL occupation

Limiting the use of generalist occupations such as Program or Project Administrators and Specialist Manager NEC, and potentially requiring a skills assessment for such occupations

Changes to the training requirement will raise the bar on sponsors to ensure that they meet the training requirement each financial year that they are using the 457 program. Changes include:

Creating a positive obligation for sponsors to maintain evidence of training

Requiring employers to show compliance with the training requirement for each year for sponsorship renewals

Requiring newly established businesses relying on a training plan to meet the training benchmark after the first year of operations

Changes to the Market Rate Salary requirement are also potentially significant. The increase of the threshold for the exemption from the market rate requirement from $180,000 to $250,000 may not affect a huge number of 457 applicants.

However, the requirement to establish the market rate salary by reference to other businesses in the region, rather than just relying on the sponsor's business, may be of concern to many employers. It is difficult to see how this could be implemented - in particular it would be difficult to get evidence of salary level from competitors operating in the same market. In the Ministerial announcement about the proposed 457 changes, reference was made to consulting with 'stakeholders' about employment conditions.

The Minister has been discussing his other concerns with the 457 program and may be considering further changes. The Minister has expressed concern about:

The number of 457 holders in Australia

Over-use of the 457 program and low 457 salaries in certain industries (eg retail and food preparation)

The Minister has expressed a firm intention to legislate prior to the end of the current Parliamentary term, and we will update this website when more details are available.